Many students learning English have to first learn how to read Latin script before they can even begin. For children, this is easier than adults. Students who come from countries, such as China, Korea, Japan, Saudi Arabia, and Russia all have different alphabets. On Dave's ESL Cafe, posters had a couple of suggestions for teachers teaching these types of students. You might also try learning their language so you know what they're going through. Fluffyhamster says that you should try to use pictures in Powerpoint presentations or use realia when possible. Although nowadays teachers don't like drilling, in cases where students are unable to read, drilling does work. That doesn't mean that your whole class has to be composed of drilling, games work as well. TPR may work depending on your students. Many students usually are able to read, listen, write, and speak English in that order when they're student ESL or EFL. However, students who can't read often listen and speak first. Since you're dealing with students who can't read, you should try teaching them phonics as well as penmanship. Again, although not looked upon positively nowadays, having a teacher centred classroom might work better than pair or group work. It depends on your students though. Lastly, remember to smile. Smiling works wonders.
Fluffyhamster goes on to say that you're going to have issues finding English-English materials for adult students who can't read, so you might have to create your own. Mnemonic are useful as well. English speakers learning Japanese often use mnemonics, so you should be able to use them for students learning English as well. Here are some examples at this post.
Fluffyhamster suggests Joanne Kenworthy's Teaching English Pronunciation (Longman 1995) chapter 5 has a good guide about English sounds and spellings that might be able to help your students out. COBUILD English Guides 8: Spelling has lots frequent words containing particular phonemes in initial, medial or final position. The Oxford Learner's Pocket Dictionary also has good information in the "Help with spelling and pronunciation" section. If you're looking to do a bit of research, try reading Diane McGuinness' Why Children Can't Read or Early Reading Instruction. The ERIC website might also have other resources. (Make sure you check the box for Full-Text Availability - Show only results with free full text directly from ERIC' that is immediately below the Search for fields on the Advanced Search page.)
Fluffyhamster says that you might want to also try these resources (most of them are free): Phonics Activites for Reading Success, Adult Literacy, Tips for Teaching Phonics, Literacy by Pearson Longman, HCT's Reading and Phonics, Teaching English Spelling, and Ideas for learning spelling.
Rp suggests reading the book Best Practices in Literacy Instruction, by Gambrell, Morrow and Pressley.
Eric18 says that personalised tutoring, often with picture dictionaries and workbooks, can be effective. He also says that the American Library Association on adult literacy has lots of good info.
Neilpollick adapted a set of books designed for English speaking toddlers. He added some pages about grammar and then had some of the teachers record the books to MP3s. By doing this, the students could practice outside of class, similar to books on tap. He also said that Headway is good since it uses lots of pictures.
ESL About has some good links as well.
